NEW YORK / WASHINGTON (Reuters) — Republican
Representative Michael Grimm from New York was indicted on fraud charges
in connection with a Manhattan fast-food restaurant he partly owned,
according to court documents unsealed on Monday. He faces up to 20 years
in prison if convicted.

The charges follow a federal probe of Grimm's fundraising that has
been going on for more than two years, and Brooklyn U.S. Attorney
Loretta Lynch told reporters a "larger investigation" was ongoing.

Grimm is a former Marine who subsequently worked as an FBI agent. He
was elected in 2010 with a wave of conservative "Tea Party"
Republicans advocating low taxes and government spending, but built
a moderate voting record.

In January, he generated headlines when he threatened to throw a
television reporter off a balcony after an interview in the U.S.
Capitol on the night of President Barack Obama's State of the Union
address. The incident was caught on camera.

Speaking to reporters after a court hearing on Monday, Grimm vowed
to return to work and "fight tooth and nail until I'm exonerated."

He notified House Speaker John Boehner in a letter on Monday that he
would step down from the House Financial Services Committee "in
light of recent events," but added that "upon a successful
resolution of pending legal matters my intention is to resume said
position as an active member of the committee."

A spokesman for Boehner said the speaker "believes Rep. Grimm's
decision is appropriate under the circumstances."

Prosecutors said Grimm and the health food restaurant,
Healthalicious, under-reported wages paid to workers, many of whom
did not have legal status in the United States. They said many of
the wages were paid in cash.

Grimm and the restaurant also concealed from federal and New York
state authorities more than $1 million in gross receipts,
prosecutors said.

The 20-count indictment says Grimm oversaw the restaurant's
day-to-day operations between 2007 and 2010, just after he left the
FBI. He subsequently sold his stake in the restaurant. The
indictment also charges Grimm with lying under oath in January 2013
about his role in the restaurant.

Grimm, who represents a district that covers Staten Island and
southern Brooklyn, is free on a $400,000 bond.

He appeared briefly in federal court on Monday dressed in a dark
gray suit and striped blue tie. He stood with his hands folded in
front of him as he responded to a judge's questions.

"As a former FBI agent, Representative Grimm should understand the
motto: fidelity, bravery, and integrity. Yet he broke our credo at
nearly every turn," said George Venizelos, who runs the FBI's New
York office.

"Representative Grimm lived by a new motto: fraud, perjury, and
obstruction," Venizelos said.

One of Grimm's fundraisers, Diana Durand, was arrested in January on
charges that she illegally funneled more than $10,000 to his
campaign. On Friday, a grand jury indicted Durand on charges that
she made campaign contributions that exceeded federal caps in 2010.

It was the third scandal to hit House Republicans in recent months.

In April, married Representative Vance McAllister of Louisiana was
caught on camera passionately kissing a married staffer in his
office. He said on Monday he would not seek re-election to a second
term. In January, Trey Radel of Florida resigned after pleading
guilty to buying cocaine.

The nonpartisan Cook Political Report, which tracks congressional
races, changed its rating on Monday of Grimm's re-election race
against former New York City Councilman Domenic Recchia to "lean
Democrat" from "lean Republican."

(Reporting by Bernard Vaughan in New York and Aruna Viswanatha and
Thomas Ferraro in Washington; editing by David Storey, Peter Cooney
and Bernard Orr)